Developed nations are ageing with increasing numbers of retirees going onto pensions, but backgrounded by increasing old age dependency ratios while decline in working age cohorts, which pay taxes to support budgets. Many nations now are desperate in attracting long term temporary net migration or churn over of workers, students, digital nomads etc. as ‘net financial budget contributors’ who cannot and will not access services and budgets, open only to citizens and some permanent residents.
See OECD (2023), Australian Old-age dependency ratio (indicator). doi: 10.1787/e0255c98-en (Accessed on 07 August 2023)
Australia’s solution, still in a generational development phase for another generation, was to introduce industry superannuation under a Labor government in the 1980s-90s, tracking the baby boomer ‘bubble’ which is now in transition to retirement; influenced by the US 401(K) employee accounts system.
Rationale was the need to provide retirement income, public healthcare and other services, but keeping pressure off budgets and/or pension funds by introducing superannuation for employees paid by employers i.e. industry, in addition to public/independent, retail or self managed; all invest in mix of shares, property, fixed interest etc..
Employers pay the SCG Superannuation Contribution Guarantee into people’s individual or multiple superannuation accounts, also allows personal contributions, tax breaks or incentives and compounding, for then later to access income streams in retirement.
While the state pension is and has been a citizenship right to apply, especially for single retirees without substantial superannuation funds, it is means and assets tested i.e. if no or little superannuation income, full pension is available, then tapering downwards to zero depending level of Superannuation retirement income stream and thresholds.
Win win for Australians now and into the future, but it has been under constant attack by right wing parties, Koch linked think tanks and media (as a proxy for unions), described as a tax on business, gives funds too much financial power and influence e.g. including those linked to unions, while total now stands at approximately 2 trillion Euros, then conversely the same complain that the system is used as a tax dodge by wealthy…. or demands to allow substantive access at an early age for buying property….. Trying to crash the system.
Following is an article from former Australian Treasurer Wayne Swan in The Daily News owned by giving good analysis and overview of how the benefits far outweigh any costs, keep budgets balanced and retirees comfortable, whether they have superannuation, or not.
‘From The New Daily Australia:
Wayne Swan: Superannuation’s benefits continue to stack up as ideologues attack
It wasn’t all that long ago that for most people retirement meant just getting by on the pension.
No luxuries, no holidays, no spoiling the grandchildren. Such things were the preserve of a very lucky minority with generous pension plans attached to their salaries – airline pilots, professors, bank workers, public servants, police force members, and others.
For the rest, giving up work might mean living on the borderline between sufficiency and poverty.
Today, thanks to industry superannuation, working people can have a decent retirement, too. Ending centuries of age-related poverty is one of the biggest examples of social progress in our nation’s history.
Dare I say, giving people a couple of extra decades of economic security through superannuation has probably advanced the sum total of human happiness more than just about anything else an Australian government has done.
How otherwise sensible people could be opposed to this step forward for our society really is beyond me.
It shows you just how easy it is to forget the realities of life in the past – especially when you have a vested interest or ideological obsession in forgetting.
Ideological opposition
That’s where most of the opposition to industry superannuation is coming from: A small minority with ideological opposition to the equal representation model of unions and employers on a profit-to-member basis.
The main point to grasp is that the performance of industry superannuation funds isn’t what motivates them – because their performance is consistently superior to that of the retail funds. They just think that if unions are involved, it must be illegitimate.
Well, industry super is now middle-aged and after 40 years the first cohort of members who have had industry super for their whole working lives are starting to retire.
Ordinary people understand gains
This is why the opposition to industry super is doomed – ordinary people know what benefits it produces. And those with 40-year-old balances, built up by compounding interest during this era of steady and sometimes accelerated economic growth, are increasing in number every year.
That still isn’t stopping its opponents from trying to pull industry super down.
Without financial arguments to fall back upon, they are resorting to crude and misleading populist arguments that are getting more strident and desperate with every silly campaign. It takes several forms.
On the political right, the current argument of choice involves housing.
Putting money into super, they say, is stopping young people saving for a house. And if only those young people could get their hands on the super in their balances, they could go out and bid more for a house each Saturday morning.
But of course all this will do is bid up the price of housing, and rob them of compounding interest over their working life, meaning they will be worse off and even more exposed to the ups and downs of the housing market. Super helps them diversify their assets – a good thing if ever there was one.
This choice between a retirement and a house is a false choice indeed.
But one can see why the opponents of industry use it.
It’s emotive – and as we know emotion is easier to create than understanding. They know it’s a bloody brave politician who will tell millennials they have to choose between saving for a house and retirement.
But brave they must be, because raiding super for housing is like shutting down schools to pay for hospitals.
Sound investment decisions
The right’s other argument is that superannuation balances are being turned into piggy banks for do-gooders to raid for their pet schemes, like public housing and industry investment.
All funds are required by law to make investment decisions based on their projected returns to members. This law hasn’t changed and never will. Industry funds would never stand for such a change. Never.
On the left, different but no less populist and misleading arguments are being employed with increasing frequency.
One is that industry super, in fact all super, is a neoliberal plot that has effectively privatised the aged pension.
This is another nonsense. Industry superannuation didn’t come at the expense of the pension—the pension was raised significantly during its period of creation, as were other benefits to seniors. The dual existence of industry superannuation and a significantly higher aged pension is a double buffer against the vicissitudes of old age.
In the long-term, this so-called progressive populist critique of industry superannuation is as dangerous as the conservative populist critique it imitates. It’s a case of different sheep costumes but essentially the same wolf.
Far better off
Australians and Australia are far better off for four decades of the equal employer union representation model on a profit-to-member basis.
With each passing year, its future will be more certain, but there is still much work to do to combat the dangerous myths peddled by its opponents.
Fighting back against these misleading campaigns is one of the most important things for Industry fund leaders can do.
Wayne Swan is chair of Cbus. He was also Treasurer of Australia, and Deputy Prime Minister of Australia in the Gillard and Rudd Labor governments.’
For more related articles and blogs on Ageing Democracy, Australian Politics, Demography, Finance, Government Budgets, Koch Network, Pensions, Superannuation and Younger Generations click through:
Baby Boomer Bomb or Bubble is Ending – Retirement Income Planning
Population Pyramids, Economics, Ageing, Pensions, Demography and Misunderstanding Data Sets
Population Decline and Effects on Taxation, Benefits, Economy and Society
Pension Systems and Budget Sustainability
Immigration Population Growth Decline NOM Net Overseas Migration
Japan – Australia: Ageing Populations – Demographic Socio Political Comparison
Education Training Society 